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Tuesday, 24 February 2009

30 foreign-based investors utilise Saudi credit swap

Riyadh: On behalf of foreign investors, HSBC Saudi Arabia has purchased shares worth over 4 billion Saudi riyals (Dh3.93 billion) since swap deals were allowed in August 2008.

"This shows that foreign investment in Saudi-listed firms is gathering momentum despite the global financial crisis," said Osama Shaker, HSBC Saudi Arabia, Managing Director.

In August, the Saudi Capital Market Authority, the market regulator, allowed non-resident foreign investors to sign swap agreements with Saudi intermediaries, permitting indirect ownership of shares, in one of the boldest steps to date taken by the Kingdom toward opening up its stock exchange, the largest Arab bourse, to foreign capital.

Kuwaiti press savours rare freedoms

W hen placed next to each other, the words Arab and press can bring to mind harsh images of snarling government censors, bruised journalists and government spokesmen spouting propaganda. Such is not the case for the oil-rich emirate of Kuwait.

The tiny Gulf state has the freest press in the Arab world, ranking above all other Arab states, including liberal Lebanon, expat haven the United Arab Emirates and close US ally Jordan on the Reporters Without Borders 2008 press freedom index.

Locals attribute Kuwait's unique press environment to the country's long tradition of self-governance. "If you look at the history of the development of Kuwait, we have no coup d'├ętats , no military takeovers. Our ancestors established the practice of choosing the governors of Kuwait," says Dr Mohammad al-Rumahi, editor-in-chief of Awan, a daily. Established in late 2007, Awan is among a group of new dailies that has entered the market after the opening of licensing by the government.

Nationals' job protection may return to haunt Emirates

Was the United Arab Emirates' decision to regulate further the dismissal of nationals working in the private sector a knee-jerk reaction or a necessary measure?

Not surprisingly, the answer depends largely on who you speak to. To many Emiratis, it was the right move in a climate of uncertainty to safeguard a tiny pool of nationals - less than 0.5 per cent of the some 3m workers in the country - who work in the private sector as companies throughout the UAE lay people off.

Officials defended the decision by speaking of a social responsibility to keep all Emiratis in work, and described the action as part of efforts to create "stability and prosperity for its people".

A Russian ‘reset button’ based on inclusion

Three weeks ago, Joseph Biden, US vice-president, made headlines by proclaiming the Obama administration’s intention to press “the reset button” in US-Russian relations. Next week, Hillary Clinton, secretary of state, will sit down in Geneva with Sergei Lavrov, Russia’s foreign minister, to figure out what that metaphor means.

While there are plenty of specifics to talk about, the overarching concern in Washington and European capitals is that Russia is cracking down at home and throwing its weight around abroad. Not surprisingly, many are worried about a new cold war. However, that is not a useful way to think about what is happening.

Unlike the Soviet Union, Russia does not embody or promulgate an alternative model of political and economic governance; it has no real allies, even – and perhaps especially – in its own neighbourhood. Despite its formidable nuclear arsenal, it is no longer a military superpower. Moreover, there is less braggadocio in Moscow these days than there used to be about Russia being a “petro-superpower”, given the combined effects of the global recession, the fall in oil prices, the evaporation of foreign currency reserves and the flight of foreign direct investment.

What’s coming next, from the ‘Man Who Saw It Coming’

The litany of dire predictions for currencies, commodities and the global economy in general not only seems endless - it is getting more predictable by the day. That is because few pundits are making any waves - or money - out of playing Pollyanna, as everyone from Jim Rogers to Nouriel Roubini well know.

While it’s an increasingly safe bet for analysts to leap on the gloom’n'doom bandwagon, there are a handful of analysts out there who get taken more seriously than most - as opposed to herds of kneejerk Cassandras who have shelved their usually bland reports to start warning that the “western banking system is imploding”; “the US is on the brink”; “Europe is melting down”; “China is going down the toilet”; “Japan is already down in the S-bend” etc etc.

Among them, CLSA’s equity strategist Christopher Wood can rightly claim to have been more prescient than most of his ilk - warning some years ago about the consequences of exploding US mortgage securitisation and more specifically, about the growth of subprime lending. In his often colourful newsletter, Greed & Fear (which sadly we no longer receive), Wood has been banging on about everything from warning signs in the Baltic Dry Index for commodities prices to Britain’s banana republic tendencies long before it was vogueish to do so. As a result, he has been consistently rated among the top equity strategists on Asia and last year was billed by the Wall Street Journal as “the man who saw it [the subprime mortgage crisis] coming”.

Nomura gets licence to provide financial services from DIFC

Asia-based investment bank Nomura International yesterday said it has received a banking licence from the Dubai Financial Services Authority to provide investment banking and capital markets services from the Dubai International Financial Centre (DIFC).

Nomura, which completed the acquisition of Lehman Brothers' investment banking, equities and fixed income businesses in the Middle East on October 13, 2008, said it plans to offer consolidated services in the region.

Abdulla Al Awar, Managing Director of DIFC, said: "The Middle East offers Nomura tremendous long-term opportunities, and with the acquisition of Lehman Brothers' businesses in the region, it is perfectly positioned to tap the growing regional market for financial services."

Former minister jailed for 'deception'

A former government minister was sentenced yesterday to two years in prison after being convicted of betrayal of trust and unlawfully taking possession of money and property.

Authorities relieved the defendant from his Cabinet post as soon as his case was referred to court, lifting his immunity from prosecution.

Two of three co-defendants were similarly sentenced and will be deported after serving their time because they are not UAE nationals. The fourth defendant was acquitted. The Dubai Misdemeanours Court of First Instance agreed that the defendant, who had been a minister of state without portfolio, had deceptively persuaded a woman, identified as MJ, to sign over control of her late brother’s information-technology company in 2005.

Fraud investigation nears end

An almost year-long investigation into alleged criminal activity by the former chief executive of the developer Deyaar, Zack Shahin, and three co-accused is nearing its end, the Dubai Attorney General said yesterday.

In a statement released by the state news agency WAM, Issam al Humaidan said the charges against Mr Shahin and his co-accused include forgery, embezzlement and fraud. Authorities said they had also uncovered evidence supporting an additional charge of money laundering.

The announcement provided the most detailed look yet into the case that first came to light 10 months ago. Prosecutors allege the co-accused transferred millions of dirhams in misappropriated funds between banks in Lebanon, Switzerland and the US.

$20bn makes a very comfortable cushion

With an extra US$10 billion (Dh36.73bn) of federal money in its war chest and another $10bn on tap, Dubai has won some enviable breathing room for coping with the global crisis.

More than anything else, the decision by the Central Bank to lend the emirate $10bn provides what analysts and economists say is an unambiguous reaffirmation of federal support, something markets had been looking for amid growing concerns about Dubai’s ability to shoulder its $80bn debt burden. Most immediately, it appears to have dispelled any concern that Dubai and its corporate entities, or Dubai Inc, might be forced to default on any of the about $13bn in debt they have coming due this year.

“It’s positive for Dubai Inc. It shows that Dubai can get hold of financing at a difficult time and underlines the commitment of the federation,” said Charles Seville, associate director of sovereign and international public finance at Fitch Ratings in London.

IPIC acquires Nova for $2bn

An Abu Dhabi investment vehicle has agreed to buy Canada’s Nova Chemicals in a $2bn deal to help it develop the world’s largest petrochemicals complex in the wealthy Gulf state.

The deal could also foreshadow more Middle Eastern money targeting foreign assets.

International Petroleum Investment Company, a government investment vehicle, said it had agreed with the management of Canada’s largest plastics producer to an all-cash deal at $6 a share, a premium of more than three times the company’s share price on NYSE on February 20.

Dubai

All together now. Dubai’s $10bn cash injection from the United Arab Emirates’ central bank has eased concerns about the struggling emirate’s ability to make good on $13bn in debt payments due by the end of this year. Just as important as the deal’s dollar figure, however, is the political message it sends. After weeks of uncertainty, Abu Dhabi, the Emirates’ oil-rich sugar daddy, has demonstrated its willingness to stand behind its poorer relation.

Strictly speaking, the UAE central bank’s purchase of $10bn of five-year Dubai bonds – part of $20bn in new bonds priced at 4 per cent interest – was agreed at the federal level. But at its core, the move amounts to a bail-out by proxy of Dubai by its wealthier neighbour, Abu Dhabi, which is the biggest contributor to the UAE’s federal budget thanks to a quirk of geography that left it holding 8 per cent of the world’s oil reserves.

UAE: Job cuts on airwaves

Dubai radio station Coast FM laid off all its DJs at a meeting yesterday. The station's presenters have not been on air or been paid since early January but had hoped their jobs would be saved. Neil Petch, the managing director of Parent company, ENG, broke the grim news at a meeting at the Al Attar Business Tower yesterday afternoon.

However, he said ENG would pay the DJs up to the end of February. The popular station has been struggling with transmission problems and the global slump in media advertising. It has been playing music non-stop since early January after telling DJs not to show up for work. ENG spokeswoman Gemma McKeown confirmed that all the station's presenters were laid off yesterday. She said management would try to absorb Coast's remaining staff into ENG's other divisions, which include publishing and outdoor advertising.

Cool reception for Iran bank flotation

Bank Mellat, Iran’s third-largest bank, has at last made it into the private sector – officially, at least.

But its lukewarm response from investors is likely to ring warning bells for other banks lined up for Iranian-style privatisation.

Bank Mellat, which has $1.3bn (€1bn, £900m) in capital and says it holds about 15 per cent of Iran’s loans and deposits, became the first state-owned bank to embark on privatisation when it offered 5 per cent of its shares on the Tehran stock exchange last Wednesday.

Dubai markets jump on news of loan

Dubai markets jumped higher in early trade on Monday on the news that the United Arab Emirates will lend the emirate at least $10bn in a bail-out aiming to restore confidence and rescue the struggling economy.

The Dubai Financial Market index rose 5 per cent as traders welcomed the sign that the federal institutions will help the government as it seeks to refinance its $74bn debt mountain. This includes $13bn of repayments due during the remainder of 2009, according to estimates by EFG-Hermes, a local investment bank.

Emaar Properties, a Dubai government-backed real estate giant, which was hit in trading on Sunday on news that its US unit had filed for Chapter 11 bankruptcy, was up 12.7 per cent as the mood around Dubai lifted. DP World, a government-controlled container ports operator, rose 4.5 per cent on Nasdaq Dubai.

Investors reassured by Dubai bail-out

Since the financial crisis struck, Dubai officials have been telling the world that the emirate will extricate itself from an $80bn debt hole it has dug itself during the global credit binge.

But as the markets on Monday jubilantly toasted an in effect, loan of $10bn (£6.9bn, €7.8bn) from the Central Bank of the United Arab Emirates, it became clear that Dubai – like other countries around the world – had finally come to terms with the harsh economic realities at home and it accepted a federal bail-out.

As the emirate’s six-year property boom turned to bust late last year and the world’s economic downturn harmed every sector on which Dubai’s prospects depend, investors had grown increasingly sceptical of the city-state’s ability to refinance its debt, sending insurance against a default on Dubai’s debt to levels similar to Iceland.

Bailing out Dubai

The emirate of Dubai, probably the brashest creature of globalisation, has just been bailed out by its conservative and censorious older brother, the emirate of Abu Dhabi.

Coming just after Dubai had come to be perceived as a risk equivalent to Iceland – its five-year credit default swaps this month leapt beyond 1,000 basis points, closing on the spread of Icelandic bonds – that will restore some confidence.

The central bank of the United Arab Emirates has bought up half a $20bn five-year bond issued by Dubai, one of the seven emirates in its federation. After a mediocre response to the refinancing of Borse Dubai last week, that pretty much settles the question of Dubai’s ability to service its debts.